We have found that one of the most important mindsets of a self-sufficient lifestyle is the ability to make decisions about your life in a very independent way, allowing yourself to follow our heart and your soul rather than doing what others might think is right for you. In this context, it sometimes amazes me how much of our lives is influenced by money. We spend more than 25% of our adult lives ( at least 40 hours a week for most of us) working at a job to make money. Most of us spend many hours a month worrying about whether or not it will be enough to pay the bills, send the kids to school, or live off of in retirement. Then there are the daily/weekly decisions about whether we can afford that next purchase or fund that home improvement project. For many of us, money can be one of the primary factors that influences most of our most important life decisions…where we work, how we spend our free time, even how many kids we should have. A life guided by these decisions does not look nor feel like freedom to me.
I was thinking about this one day on my way to work as I dreamed of what life might be like if money didn’t matter. What might I be doing? Running a little farm probably. So if that is really what I want, why don’t I just go and do it? Too many bills to pay I guess. But where did all of those bills come from? Ultimately, it came down to decisions that we made. As I let my mind wander, I traced our steps back to a few key decisions in our early adulthood that nearly cemented our current position in life. Decisions that seemed to be logical and necessary at the time, but eventually saddled us with so much debt that continuing to work in a typical corporate environment was really the only possible outcome. As I looked around at the thousand other people around me on the highway that day, I realized that we were probably all in the same boat…driving hours a day to work at a job that we may or may not enjoy in order to pay for the decisions that we made decades ago. “If I only had it to do over again” I thought….here is what I would have told myself.
- Use paper, not plastic… The first of my poor financial decisions came in the form of a credit card. I was enchanted by the fact that I didn’t have to wait to save up for that new snowboard. I could simply buy it now and pay it off little by little. Ooooh…I need a new stereo too. No worries, I can still make the minimum payment. Sure, I can go out for dinner tonight…its only a little bit compared to what I already owe. It didn’t take long before I had racked up a bill that was far more than I had the income to pay for. This is a slippery slope that many young people fall into, and with online shopping, it has become increasingly easy to blindly spend at the click of a button. Ideally, I should have gotten into the habit of buying things only with money that I already had, even if I still used the credit card and paid it off every month to build my credit rating. Luckily, I met a girl with better financial sense than I did to break me of this habit before it got out of control. Thanks for that to my lovely wife 🙂
- “Learning” from my mistakes… The next in my string of poor financial decisions was how I managed paying for college. My parents were great, and footed at least half of my tuition and many of my living expenses while I went to a state funded school. They were also diligent enough to complete most of my student loan paperwork (if I recall because I was too negligent to fill it out on my own). This was great for me at the time, but in retrospect, I had no idea how much debt I was racking up. While it was not the most expensive school in the world, it left me with a huge bill when I graduated that took darn near the entire 10 year term for me to pay off. I probably could have avoided this by being more diligent about looking for scholarships and perhaps choosing a less expensive school. For many careers, what school you go to matters far less than what you are capable of, how you act, and how well you can communicate/present yourself. In my career, I have been responsible for hiring many people, and can say that I am far more impressed by what you have accomplished, how well you answer questions, and your handshake than what school you got a degree from. For many folks, this student loan debt can range anywhere from $10K-$100K+. This is a particularly difficult kind of debt, as many types of student loans cannot be waived even under circumstances of bankruptcy, so tread lightly here if you can.
- Nobody cares what kind of car you drive!! – I think that I have had car payments ever since I was 17 or 18 years old. Even though most of the cars that I had were nothing special (except for my 1992 VW Corrado, which I still miss), I bought all of them with a loan, deciding how much to spend by how much I could afford for a monthly payment. After graduating college and getting a good job, I decided that I could afford monthly payments on a brand new car. Besides, all my friends had new cars so I should too, right? After signing papers on a brand new VW Jetta GLI, I got in that sweet new ride, and drove the most expensive 100 ft of my life, immediately dropping 20% of the value of the car the minute that I left the lot. Funny enough, Maria actually bought the EXACT same car (only in a different color), but she did it used, and spent ~30% less than I did. She was always the smart one 😉 I definitely loved that car, but it simply wasn’t worth the money that I was paying for it. Eventually when we had kids, I sold it and bought my first car with cash…a 2004 Honda Civic with crank windows and manual door locks. I still drive that car to work every day (can’t beat the gas mileage), and haven’t had a car payment since. While most of my contemporaries drive BMWs, Mercedes, and Acuras, no one has ever commented on my clearly inferior car. Many people make the same decision as I did initially, taking on $20K-$40K+ in debt just to have a ride as nice as their buddy’s when a $5K car will do the same job without the monthly payment.
My beast…a ’72 Ford 100 that we use for hauling compost and firewood. Barely legal, but she does the job!
- “Can’t buy me love” – A few years into my post-college career, I met the beautiful woman that would one day become my lovely wife. Maria and I met at work, both at the beginning of what promised to be successful careers. While we both knew after the first date that it was a foregone conclusion, after a couple years of dating we decided to get married. Since we were both in professional careers and Maria was able to put some money away in her first few years of working (remember I said she was the smart one!), we decided to pay for the wedding as much as we could on our own. So, before we first started the wedding planning, we estimated what our budget should be. It didn’t take long to realize that we had underestimated how much it would cost. WAY underestimated. With almost everywhere around us charging at least $80-$100/person for a catered reception, and us both coming from fairly large and tight-knit families, the facility alone threatened to consume our entire budget. We hadn’t even started to deal with the thousand other amenities that you “need” to plan for, including flowers, photographer, videographer, transportation for the guests, the dresses, the tuxes, the rings, the gifts for the groomsmen, the gifts for the bridesmaids. All of that before you even think about going on a honeymoon. Everything said and done, we had spent close to 6 months salary on the wedding. Don’t get me wrong, it was a magical, beautiful whirlwind of a day, but we both agreed that we would have had just as much fun with a tent, 200 hamburgers and a few kegs of Yuengling. We had been so programmed into thinking what the “Big Day” should be like that we blew nearly our entire nest egg on a big party. With so many divorces related to money issues, this is hardly the way to start a marriage! Again, almost everyone we know followed suit, with most spending anywhere from $20K-$60K+ on their weddings.
on our honeymoon in Belize – magical and expensive, at the same time!
- Put a roof over your head, not a McMansion – When we bought our first house together, we again followed societal norms and standard financial guidance, calculating what we could afford based on what our monthly income was (I think mortgage payment <25% of monthly income was the common advice of the day) and what our friends were living in, instead of carefully assessing how much house we needed and looking for homes in a less expensive area. We ended up basically maxing out that guidance for a townhouse in a nice neighborhood that was pretty close to work, friends, and nightlife. Being in the home-loan hayday before the housing bubble busted in 2008, we were able to get a 107% loan and didn’t even have to put any money down (which was great, since we had already allocated all of our savings to the wedding). Fast forward 3-4 years when we were pregnant with our oldest son, and we were already deciding that we needed to move to be closer to family and have a little more space to raise what we wanted to be a large family. Having bought at the peak of home prices in a neighborhood of 1,000 identical townhouses, our house didn’t appreciate much and we basically broke even. “I thought houses were supposed to appreciate?”, I remember thinking. Luckily, we were still a few months ahead of the housing crash so we were still able to sell the townhouse and upgrade to the home we live in today without too much trouble. We were a little smarter than we were the first time around, but not much as we still live with a mortgage that is probably bigger than it needs to be. Many people follow a similar path, with many in eastern PA spending $150K-250K+ on their first home when they could easily live in a smaller, more economical home if they weren’t trying so hard to impatiently keep up with their vision of what life is supposed to be like for someone in their late 20’s.
In the first 5-10 years of your adult life, these five decisions alone can leave you with a bill of $200K-$500K+. For many, this is a debt that they will spend a lifetime repaying. A lifetime spent away from their families working jobs that they hate. A lifetime worrying about bills. A lifetime using one debt to pay for another. A lifetime fighting with their spouses about spending, sometimes ending in divorce and broken families. A lifetime that could have been completely different if they had just been more frugal in their decisions and been more patient about getting the “good” things in life (things that always end up losing their luster and probably weren’t worth it to begin with).
While we fell victim to all of these pitfalls early in our lives, we were able to catch most of them quickly enough to prevent really long term impact, sacrificing enough over the last few years to whittle our debt down to basically just our mortgage. While I can’t yet afford a Delorean to go back in time with, and it is hard not to think about how things might be different if I had made some different decisions in those early years, we can already start to taste the freedom that comes with being out of debt, and the independence to let our hearts guide our decisions rather than our wallet and our ledger. Maybe one day we’ll run that farm after all 😉
Are you living debt free? If so, how does it feel and what have you done with that freedom? If not, what is your debt keeping you from doing? What are you doing to get rid of it?